If you are a first time investor in today’s show we have the golden rules for you to follow if you don’t want your plans to come to a screaming halt. We talk with George Raptis, from Metropole Properties in Sydney.
Kevin: Maybe you’ve decided to become a first time investor. Well, congratulations. To help ease the burden as you first start in, George Raptis – a man with a huge amount of experience – has helped lots of first time investors get into the market. George, of course, is from Metropole Properties in Sydney.
Good day, George.
George: Hi, Kevin. How are you going?
Kevin: Good, mate. I want you to give me your top ten tips for first time property investors.
George: Thank you, Kevin. Obviously, the first one is you set clear financial objectives. Never invest in something just because someone else said it was a good thing to do.
Kevin: Not even you, George?
George: That’s right. Not even me. Investing in property is no different. Take a step back. Make sure you have yourself clear financial goals. For starters, you would have to define what they are and then ask yourself, “Will investing in real estate help me achieve them?” You have to have tangible things like return on investment, cash flow, and timeframe. You also need to consider risk and liquidity factors.
The next thing I would say is treat your investment like a business. Owning a business is like owning a business and you’re the CEO. You have to make sure your business is structured correctly, supported by the right leadership, resources, technical knowledge, and experience, is financially viable, it’s meeting your financial targets, and it complies well with the government rules and regulations. If you think you can’t deliver on these requirements yourself, then you need to hire someone who can or think twice before investing.
The other important thing, Kevin, is some people think they can do it on their own. Seek help. Before taking on what will be probably one of the biggest financial and emotional commitments one will make, make sure you learn about and fully understand the business of property investing.
Kevin: Is this about building a team around you, George?
George: Correct. Remember, a little knowledge is a dangerous thing. If you don’t invest, you don’t know, and if you don’t get the right advice from sources like trusted family and friends who may have prior investing experience, independent advisors like accountants, property advisors, and financial planners are essential.
Research the market. As part of your education process, make yourself the area expert. Get out there. Hit the pavement. Have a look at what’s selling, what’s not selling, what people like, what they don’t like, and so forth. In other words, get out there, focus on a particular market, and know what’s going on in your local patch.
The next one would be be patient. Invest sensibly. We see so many people rush off and they follow the stampede. They want to do something for the sake of doing it. Don’t rush. You have to balance two competing requirements – what you want and what your potential renter and buyer wants. Take your time. Consider all the options.
Another thing is capital growth is key. It might be stating the obvious, but you should only buy where there is potential for above-inflation and long-term capital growth. This is where research, education, and wisdom come to the fore.
Kevin: That’s another great reason to take your time with it, George. Isn’t it?
George: Exactly right. There’s no rush, Kevin.
Property inspection is a must. The last thing you want to do is buy a lemon. How many times do we hear about people buying something off the Internet halfway around the world and when they have a look at it, it’s nothing like what they envisioned it to be?
It’s important that you inspect a property thoroughly with an objective eye, and it’s a good idea to bring some family, friends, or get an unbiased perspective on what’s good and what’s not. If you’re serious about a property, bring in the experts for a structural or pest report just to make sure you’re not buying yourself into a money pit.
The other important thing is cash is king. It’s extremely important that you don’t over-commit yourself financially and that you can afford to own, manage, and maintain your investment property. This means you must prepare both a personal and property budget so you can qualify how much of your own money you’ll have to commit up front as well as everything on an ongoing basis.
Avoid these fancy rental guarantees. We’ve heard about these rental guarantees, Kevin. They’re often associated with new property developments. It’s a bit of a marketing ploy – that little carrot dangling in front of you to entice you to buy. It sounds good in theory that you’ll get a minimum rental return no matter what, but in reality, they have a dubious value. They’re not there for no reason at all. Obviously, they’re trying to entice people with regards to a rental guarantee, and at the end of the day, you’re the one who pays for it.
Last but not least, don’t do it all yourself. As a first time investor, it makes sense to get all the advice and help you can get. Sure, you can do it yourself, but unless you have the right level of knowledge and experience, you’re more likely to make mistakes unless you have the support and guidance of a trusted and experienced advisor. Of course, there are costs involved, but you should view this as a way of mitigating your risks and as an investment in your education.
Kevin: Indeed, it is. I’d suggest you go back and have a listen to those words from George because there is so much good advice in there. If you want to not make mistakes when you start out, that’s the way to do it.
George, thanks so much for your time and sharing your experience with us, mate.
George: You’re welcome, Kevin.